Janki Exports International v. Union Of India And Others

B.C Patel, C.J:— By this petition, the petitioner, M/s. Janki Exports International, through Sh. S.P Gupta, a partner of the firm has challenged the notice dated July 24, 2003, issued under section 158BD of the Income-tax Act, 1961 (hereinafter referred as “the Act”), copy of which is produced at annexure P1 at page 15.

2. The petitioner is not entitled to file this petition. A petition can be filed only by a citizen and not by a firm. However, to avoid undue delay, we direct the petitioner to join Sh. S.P Gupta, a partner of the firm, in his individual capacity as petitioner No. 2 and the registry shall give a separate number on payment of court fee.

3. If that is not done within a period of four days, the petition shall stand dismissed automatically and our order shall not be carried forward.

4. By issuance of notice annexure P1, the petitioner was requested to file a true and correct return of total income including the undisclosed income in respect of the firm. The return was required to be filed in the prescribed Form No. 2B and was to be delivered within a period of 15 days of service of the notice as indicated in the notice. The petitioner immediately filed a reply on July 31, 2003, inter alia, pointing out that the Assessing Officer has no power to take cognisance of the matter particularly, after two years' period having expired from the date of assessment made in the case of the other assessee— M/s. Sunair Hotels Ltd. It was submitted by learned counsel that search was conducted in respect of M/s Sunair Hotels Ltd. on or about November 21, 2000 and the Assessing Officer in that case made an assessment order on November 29, 2002. It was further contended that within a period of two years from the date of completion of search and seizure ending on November 21, 2000, proceedings could have been initiated against the petitioner under section 158BD of the Act. But that having not been done the proceedings, having been initiated on July 24, 2003, are required to be quashed as being time-barred.

5. Section 158BD reads as under:

“Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly.”

6. As the Assessing Officer was satisfied, in the course of assessment in respect of Sunair Hotels Ltd., that there was undisclosed income belonging to the petitioner, the said Assessing Officer, as contemplated in section 158BD of the Act, handed over the documents, etc., to the other Assessing Officer having jurisdiction over the petitioner and it is thereafter the latter Assessing Officer issued notice under section 158BC of the Act. Learned counsel for the petitioner submitted that the petitioner had sent a reply immediately and despite the reply, no reasons or satisfaction recorded by the Assessing Officer have been supplied to the petitioner.

7. We find that section 158BD is somewhat analogous to section 147 in so far as the procedure that is required to be followed. Section 147 contemplates that if the Assessing Officer has reasons to believe that there is escapement of income, then notice can be issued under section 148 of the Act. So far as section 158BD of the Act is concerned, the Assessing Officer has to be satisfied that there is undisclosed income. Upon such satisfaction, the Assessing Officer is required to forward the relevant documents, papers, etc., to the Assessing Officer who is required to assess the person in respect of whom the undisclosed income has been discovered. Once this is done, we feel that the person who is to be proceeded against under section 158BD and then section 158BC, must be informed about the satisfaction of the Assessing Officer which has been recorded and he must be given a reasonable opportunity to object to the same. Satisfaction can be arrived on some material. That material would provide the reasonable satisfaction. In the case of GKN Driveshafts (India) Ltd v. ITO, [2003] 259 ITR 19, the Supreme Court, while considering the provisions of section 148, pointed out as under (page 20):

“However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.”

8. Using the same parity of reasoning, we direct the Assessing Officer to supply the reasons recorded for arriving at a satisfaction to the petitioner within a reasonable time upon the petitioner filing a return as required by the impugned notice. On receipt of the same, the petitioner would be entitled to file objections to the issuance of the notice and the Assessing Officer shall dispose of the same by passing a speaking order. It will be open for the petitioner to take the objection with regard to limitation and it will be for the Assessing Officer to pass a speaking order. After such speaking order is passed, the Assessing Officer shall proceed further in accordance with law.

9. Learned counsel for the petitioner submitted that the second part of the notice is also not in consonance with the provisions contained in the Act inasmuch as the assessee is called upon to file the return within 15 days of service of notice while under section 158BC, it becomes clear that a notice is required to be served requiring him to furnish the return within such time not being less than 15 days. In view of this fact, we hope that the Assessing Officer will consider the provisions and shall pass an appropriate order.

10. Learned counsel stated that his submission may be recorded that the notice has been issued on July 24, 2003, and, therefore, the block assessment period should be a block period of six years and not ten years as claimed by the Revenue. It will be for the Assessing Officer to deal with the matter in accordance with law. Accordingly, the petition is disposed of Interim order stands vacated.